Ad Campaign Highlights Return of Giardina at TSI

All of these newsmakers have been the subjects of an ad campaign launched this summer by Town Sports International (TSI), which offered various forms of memberships by poking fun at them.

TSI proposed free memberships, in particular, to Gibson and flight attendant Steven Slater to help them reduce stress. The Gibson ad caught national attention in July. It was featured on CNN.com, CBS Radio, Comedy Central's “The Colbert Report” and Access Hollywood.

“The good news is that people are talking about us again,” TSI CEO Robert Giardina said during a second-quarter earnings call with analysts.

Giardina, who returned as TSI's president and CEO in March, got reacquainted with the New York-based company by visiting almost all of its more than 160 clubs. TSI operates New York Sports Clubs, Boston Sports Clubs, Philadelphia Sports Clubs and Washington Sports Clubs.

Giardina said he noticed an improvement in the service level at those clubs.

“It is very evident that the level of service and experience we now deliver is better than it was when I left Town Sports nearly three years ago,” Giardina told analysts.

Improved service and the new ad campaign are two encouraging signs for TSI despite the fact that it reported decreases in revenue, membership and clubs for the second quarter.

For the period ending June 30, 2010, TSI's revenue decreased 5.2 percent, from $123.9 million to $117.4 million, compared to the corresponding period last year. Also, comparable club revenue decreased 4.2 percent in second quarter 2010 compared to second quarter 2009.

TSI suffered a net loss of $815,000 in second quarter 2010 compared to net income of $2.5 million earned in second quarter 2009.

The total member count at TSI clubs, excluding short-term summer, seasonal and student members, decreased 2.2 percent compared to March 31, 2010, and 3.8 percent compared to June 30, 2009. The total number of clubs decreased from 166 on June 30, 2009, to 161 on June 30, 2010.

“It is very evident that the level of service and experience we now deliver is better than it was when I left Town Sports nearly three years ago,” Giardina told analysts.

Improved service and the new ad campaign are two encouraging signs for TSI despite the fact that it reported decreases in revenue, membership and clubs for the second quarter.

For the period ending June 30, 2010, TSI's revenue decreased 5.2 percent, from $123.9 million to $117.4 million, compared to the corresponding period last year. Also, comparable club revenue decreased 4.2 percent in second quarter 2010 compared to second quarter 2009.

TSI suffered a net loss of $815,000 in second quarter 2010 compared to net income of $2.5 million earned in second quarter 2009.

The total member count at TSI clubs, excluding short-term summer, seasonal and student members, decreased 2.2 percent compared to March 31, 2010, and 3.8 percent compared to June 30, 2009. The total number of clubs decreased from 166 on June 30, 2009, to 161 on June 30, 2010.

One highlight from the second-quarter results was TSI's attrition rate, which averaged 3.3 percent per month in second quarter 2010 compared to 3.5 percent per month in first quarter 2010 and 3.7 percent per month in second quarter 2009.

TSI also has a new student rate that is no longer confined to the summer months. Students between the ages of 14 and 22 can receive an ongoing month-to-month membership for $20 a month, in addition to a $99 enrollment fee and a $20 processing fee. Students would not be allowed to work out at the club during peak hours between 4:30 p.m. and 7:30 p.m. unless they pay an extra $7.50 fee.

TSI lowered its guidance for the third quarter, expecting revenue to be between $113.5 million and $114.5 million (down from $120.4 million) and a net loss of between $1 million and $1.5 million.

“Overall, while we have a long way to go,” Giardina said, “we feel there is stability back in the business and that we're beginning to move in the right direction.”